How much should I budget for healthcare costs in retirement?
Most financial experts recommend budgeting 15-20% of your total retirement income for healthcare expenses. For a more specific estimate, use the Fidelity projection of $172,500 for a 65-year-old couple retiring in 2025, or roughly $8,600 annually per person.
What healthcare costs does Medicare not cover?
Medicare doesn't cover long-term custodial care, most dental and vision care, hearing aids, cosmetic procedures, or healthcare when traveling outside the U.S. These gaps can significantly impact your retirement healthcare budget.
When should I start planning for retirement healthcare costs?
Start planning for retirement medical expenses as early as possible, ideally in your 40s or 50s. This gives you time to maximize HSA contributions, research long-term care insurance, and develop healthy habits that reduce future healthcare costs.
How do healthcare costs in retirement compare to working years?
Healthcare costs typically increase in retirement due to age-related health issues and loss of employer-sponsored insurance. However, Medicare does provide a baseline of coverage that can help manage these costs.
Should I consider relocating to reduce retirement healthcare costs?
Yes, geographic location significantly impacts healthcare costs. States like Alabama, Mississippi, and Arkansas typically have lower healthcare costs, while states like New York and California tend to be more expensive. Research healthcare costs and Medicare networks in your desired retirement location.
What's the best way to save for healthcare costs in retirement?
Health Savings Accounts (HSAs) offer the best tax advantages for saving for retirement healthcare costs. If you don't have access to an HSA, consider increasing contributions to your 401(k) or IRA to specifically earmark funds for medical expenses.
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